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Emerging Issues & Trends

Maladministration – common issues

Financial Difficulty – common issues

Market value - stamp duty and transfer fees

Floods – the distinction between flood/storm damage

Maladministration – common issues

Assessment of maladministration in consumer credit and margin loans continues to be a focus for consumer complaints about financial services providers (FSPs).


Examples of maladministration cases we see may include:

  •  the FSP relies on the security of the family home with some available equity to advance funds to finance investments such as property, shares or business
  • despite potentially receiving some income from the investment, the borrower then struggles to meet the balance of the repayment
  • the loan falls into arrears which results in financial difficulty however this cannot be dealt with until the issue of maladministration has been dealt with
  • the FSP commences debt collection activity which must cease whilst the maladministration dispute is considered and our file remains open, and
  • the borrower complains to FOS that the loan should never have been granted as they could never have met the repayments and that the FSP should not have relied on their family home being sold.


In resolving these disputes, we are seeing a number of complicating factors:

  •  some FSPs say there was no maladministration and claim the decision to lend was an assessment of credit risk which has been made in accordance with their lending guidelines without having regard to their other obligations at law or under the Code of Banking Practice (if a subscriber)
  • some FSPs focus on the financial difficulty aspect of the dispute without considering the primary issue of maladministration which underlies their current financial position. The primary issue of maladministration should be addressed in the initial FSP response, and
  • some FSPs are not sufficiently aware of FOS’s approach to maladministration cases and are unwilling to provide the information and documentation we require such as their lending policies and original lending file.


More Information

See Responsible Lending Conduct Obligations and Maladministration – Consumer Credit.


Financial difficulty – common issues

The large number of financial difficulty disputes being received by this office over the last half year has placed pressure on IDR departments and we have seen a marked increase in the failure to respond by some FSPs.

It will be important to see more resources deployed in those areas assisting customers in financial difficulty.

In this Circular, we discuss emerging issues for the effective resolution of disputes about financial difficulty.


These issues include:

  • the extent of the information FSPs require applicants to provide to FSPs when assessing a request for assistance
  • what an FSP can do if a consumer does not provide requested information
  • concerns about capitalising arrears out of concern this may breach the responsible lending provisions of the National Credit Code
  • what happens if a repayment arrangement entered into in resolution of a dispute cannot be met and an applicant lodges a further dispute. 


More Information
See Financial Difficulty - Hot Topics.

Market value – stamp duty and transfer fees

The calculation of market value and total loss varies significantly from policy to policy.


Some policies expressly include stamp duty, and transfer fees in the calculation although this is not universal.


The issue has been discussed at length with the industry to ensure all insurers are adhering to policy wording and to try and clarify any grey area.


One insurer has been found to be in breach by failing to include stamp duty transfer fees despite this being explicitly provided for in the policy. This issue has been resolved.

Floods – distinction between flood/storm damage

Floods throughout Queensland and Victoria have focussed the debate on the availability of flood insurance, policy wording and the extent of flood cover. There has been a considerable increase in the number of inquiries from consumers as to the extent of cover and we are seeing the first of the disputes. Most claim disputes will involve the distinction between flood and storm damage.


FOS has attended community forums in Queensland and Victoria as part of the Insurance Taskforce and supported the Insurance Council of Australia’s initiative to have independent hydrological panels report on the likely cause of the ‘flooding’.


Some of these reports are now available and, following consultation with industry and consumer groups, FOS proposes utilising these reports to provide preliminary assessments of disputes. The parties will be provided with the assessment and a checklist of the further information required. By doing this we hope to provide the parties with an early indication of the likely success of a claim and some guidance on the additional information needed if they want to proceed with the dispute.


More Information